Court Compels Arbitration of Putative FLSA Collective Action on an Individual Basis

It has been less than a year since the United States Supreme Court’s decision in AT&T Mobility v. Concepcion, in which it held that arbitration agreements requiring the resolution of putative class action claims on an individual basis were enforceable. A recent decision of the United States District Court for the Northern District of Ohio reflects that Concepcion will apply to collective actions under the FLSA and that the proper remedy is to refer such claims to arbitration on an individual basis.

In Fitzhugh v. American Income Life Insurance Co.pdf., Case No. 1:11-cv-00533-CAB (N.D. Ohio, Nov. 3, 2011), the plaintiff was an insurance agent for the defendant, a Texas-based insurer. She asserted that she and other agents were misclassified as independent contractors and deprived of the minimum wage and overtime as a result. She sought to assert a collective action under the FLSA on behalf of herself and other allegedly similar agents. Curiously, although designated an independent contractor, the plaintiff was also apparently represented by the Office and Professional Employees International Union (“OPEIU”) Local 277, and authorized the deduction of union dues from her pay.

During her relationship with the defendant, the plaintiff signed a number of agreements providing for arbitration and designating McLennan County Texas as the appropriate forum. The agreement did not set forth the arbitration provision itself, but referred to the grievance procedures of the collective bargaining agreement between the company and OPEIU Local 277. The plaintiff contended that she never saw the union contract.

When the plaintiff filed suit in federal court in Ohio, the defendant moved to compel the arbitration claim on an individual basis. The district court carefully reviewed each of the arguments raised by the plaintiff. It rejected her claims that she did not understand the agreement or the significance of arbitration or the waiver of her right to a jury in that she was college-educated and experienced in business. Because the defendant was willing to arbitrate the case in Ohio at its expense, the court rejected other challenges that the agreement was unconscionable.

Finding that the agreement was enforceable, the court then turned to the question of whether the claims should be arbitrated on a collective or individual basis. The court found that the plaintiff’s argument that the case had to be arbitrated on a class/collective basis “flies in the face of [Concepcion]. Citing the 2010 Supreme Court decision in Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct. 1758 (2010), the court held that because the contract was silent on the issue of the availability of class action procedures, none could be read into the agreement. It therefore dismissed the collective action allegations and directed that the case be arbitrated on an individual basis.

The Fitzhugh case is significant for a number of reasons. First, it makes it clear that Concepcion will apply to statutory claims under the FLSA. Second, the court rejected claims by the plaintiff that she did not read or understand the arbitration procedure that was incorporated by reference into her agreement. Finally, the court explicitly directed the arbitration of claims on an individual basis because the agreement did not specifically provide a class action procedure. The decision in Fitzhugh is another promising sign that courts will compel arbitration of employment claims on an individual basis, a development we wrote about on October 21 regarding the California case of Dauod v. Ameriprise Financial Services, Inc., Case No. 8:10-cv-00302-CJC(MANx) (C.D. Cal. Oct. 12, 2011)

The Bottom Line: Courts are beginning to apply Concepcion to collective actions and to compel the arbitration of such claims on an individual basis.